Is this worth a punt? All opinions welcome.

Fundamentals

From FT this week:-

Intertek sees opportunity in regulation.
By David Fickling.

Published: March 9 2009 23:31

Global trade growth will be flat at best this year, but regulation will provide plenty of opportunities for outsourced product testing, according to Wolfhart Hauser, chief executive of INTERTEK.

The company, which performs measurement and testing on products from toys and textiles to grains and crude oil, reported a 31 per cent rise in full-year pre-tax profits to 139m.

EDITORS CHOICE
Toy safety fears help drive growth at Intertek - Aug-04Intertek profits up 16 per cent - Mar-10Revenue for the 12 months to the end of December rose 29 per cent from 775m to narrowly break 1bn.

Mr Hauser said the group would reposition its business to take account of the most appealing markets.

We have to add capacity in some areas and reduce in others, he said. We are obviously worried about the automotive industry, but we will continue to see product development in industries where investment is quite low, such as textiles.

Volumes of trade would also be down in the oil and chemicals industries, he said, but the toys and electrical business would hold up well as it was dependent on the pace of new product development, rather than absolute trade volumes.

Diluted earnings per share rose from 46.2p to 58.9p, while the total dividend rises from 18p to 20.8p via a 13.7p final.

The shares closed up 17p at 861p. The company is one of the largest by market capitalisation in the FTSE 250 index.(Set for Promotion)

Mark Sheppard, an analyst at UBS, said the company had beaten consensus expectations and would be a winner in the event of an increase in protectionism.

The sort of backdoor ways of increasing trade barriers weve seen putting new regulations in place on quality control is only to the benefit of these people. Instead of saying, we wont allow Chinese textiles to come into the US, they increase regulations, and testing companies like Intertek are brought in to police it.

Net debt increased nearly 80 per cent to 308.3m. Nearly two-thirds of that increase was due to the decline in the value of sterling, which also accounted for about a third of the increase in total revenue.

Positive start from the off, still a lot in this one.

Bit of Broker info here...

Broker snap: Intertek set to grow 5-10% organically

10 Mar, 2009 11:59


Safety services specialist Intertek saw revenues tip over the 1bn mark for 2008, helping profits rise 31% in the year, and Citigroup reckons there is more growth to come.

"Intertek offers strong structural growth at high return on capital employed and with sub- average cyclicality, we believe," Citi said.

The bank believes Intertek is set for organic growth of 5-10% this year with maintained or even improved margins.

Citi has raised its price target from 950p to 1000p which values Intertek at 10 times projected 2009 earnings.

Though this is a 25% premium to the sector, Citi believes the higher rating is justified "by its higher structural growth and returns, relatively defensive growth and a compelling bolt-on acquisition story."

Citi has a "buy" recommendation on the shares.

HSBC has an overweight for Intertek, raising target to 11.90 from 10.20

Lovely chance to get in this morning on this short term pullback.

Trades on a forward P/E of just 12 going into 2010 which is way too cheap for a niche player like this.

Intertek Group PLC

FORECASTS
2009 2010

Date Rec Pre-tax () EPS (p) DPS (p) Pre-tax () EPS (p) DPS (p
)
Exane BNP Paribas
17-03-09 HOLD 162.00 71.84 25.42 168.00 73.33 25.94

Seymour Pierce
09-03-09 BUY

Altium Securities
09-03-09 HOLD 165.00 72.90 22.40 182.00 79.40 23.50

ABN AMRO
10-02-09 BUY 152.12 65.37 23.00

Eden Group
04-02-09 BUY

2009 2010
Pre-tax () EPS (p) DPS (p) Pre-tax () EPS (p) DPS (p)

Consensus 163.48 72.36 23.93 174.92 76.33 24.73

1 Month Change 13.36 7.44 0.46 31.92 12.98 1.08
3 Month Change 17.92 7.68 0.76 31.92 12.98 1.08


GROWTH
2008 (A) 2009 (E) 2010 (E)

Norm. EPS 35.52% 14.78% 5.49%
DPS 20.62% 23.99% 3.34%

INVESTMENT RATIOS

2008 (A) 2009 (E) 2010 (E)

EBITDA 194.20m 221.01m 237.00m

EBIT 145.10m 189.00m 191.00m

Dividend Yield 2.06% 2.55% 2.64%

Dividend Cover 3.27x 3.02x 3.09x

PER 14.89x 12.97x 12.30x

PEG 0.42f 0.88f 2.24f

Net Asset Value PS -35.23p 196.66p 250.00p

Intertek is an inspection, testing and certification services company organised into five divisions, each serving a particular industry. Roughly, 30% of revenue comes from the Commodities sector, 27% from Industry and Insurance , 18% from Consumer Goods, 17% from Commercial and Electrical, and 8% from Chemicals and Pharmaceutical. It's a cash-generative business that's seeing strong growth, particularly in energy and commodity end-markets. Judging by past performance, that growth in revenues is likely to result in continuing earnings growth, too.